What happens if an employee invents a product while working for a company?

Introduction
Whether an inventor or funder has the right to claim ownership of an invention and is a key focal point for IPR (Intellectual Property Rights) case law. The Copyright Act of 1957 has a defined "Work for Hire" model for copyright ownership through joint contributors to that creation whereas the Patents Act of 1970 was designed without any express statement regarding automatic ownership by an employer of any product created by its employees unless there has been an express or implied agreement to the contrary. As a result, ownership disputes in India are determined by a blend of legislative analysis of Section 6, legal precedent concerning "course of employment," and the interpretation and enforcement of the Indian Contract Act, 1872. Legal professionals should be familiar with this gap in IPR to be able to prepare enforceable employment agreements that ensure an employee's innovative rights are protected.

Statutory Framework: Section 6 - "True and First Inventor"
Section 6 of the Patents Act 1970 is a major obstacle for employers in India. This section states that a patent application can only be filed by: 1. The true and first inventor; 2. The assignor of the true and first inventor; or 3. The legal representative of one of the above. The definition of the true and first inventor under this Act is a person, which means that in India, unlike many other countries, there is no “deeming provision” establishing that an employer owns an invention developed by an employee. As a result, the employer is always an assignee, and the employer must demonstrate through either a written agreement or an implied “contract of service” that there has been a valid transfer of right

The "Course of Employment" and the "Duty to Invent"
Inventions Within the Scope of Employment: If you are an employee who was hired specifically for research and development (R&D) purposes or for the purpose of solving a specific technical problem, your employer will usually own any resulting inventions. In this case, your "duty to invent" is part of your employment agreement, and your salaries are paid based on this duty to invent.

Inventions Outside the Scope of Employment: If you are not in the R&D or technical problem-solving categories, your employer does not have any claim to an invention that you independently developed, regardless of whether you used your employer's resources (e.g., laptop, internet) in creating it, unless it falls within your employer's "business interest" as it relates to your "assigned duties."

Judicial Interpretation: The Gharda Chemicals Case
Kavasmaneck v. Gharda Chemicals Ltd [2014] 2 Bom CR 363 was the main focus of the judgement given by Bombay High Court. It concerned the complaint by shareholders against the Managing Director Dr Gharda (the MD) for registering patents in his own name for various chemical processes invented by him, while using company laboratories and funds for the same. The shareholders claimed these patents should belong to the company rather than the MD. The Bombay High Court ruled in favour of the MD and found that since the MD had a contract for employment with respect to his position as MD only, and had no specific requirement to invent, the MD was the True Inventor of the Invention. The Bombay High Court thereby established that, in terms of Indian law, any employee's capacity for invention while at work will always override their rights and obligations regarding the use of company property without the additional requirement of having express terms restricting their ability to invent.

The primacy of the Employment Contract
Given the statutory silence of the Patents Act, the Indian Contract Act, 1872, becomes the primary tool for securing IP rights. Employers typically include "Assignment of Inventions" clauses to bridge the legal gap.

• Pre-Invention Assignment: Most contracts state that the employee "hereby assigns" all future rights to any inventions related to the company’s business. Under Indian law, for such an assignment to be valid, it must be in writing and clearly define the scope of the IP being transferred.

• The Restraint of Trade Challenge: Assignment clauses are often scrutinized under Section 27 of the Indian Contract Act, which prohibits agreements in restraint of trade. While a company can claim rights to an invention made during employment, clauses that attempt to claim an employee’s inventions for an indefinite period after termination are generally considered void and unenforceable.
  

Employer’s Resources vs. Employee’s Ingenuity
A common point of contention is whether the use of an employer's facilities grants the employer a "Shop Right"—a concept prevalent in US law where the employer gets a royalty-free license to use the invention. In India, there is no formal "Shop Right" doctrine. If the contract is silent and the employee is the "true and first inventor," the employee can theoretically prevent their own employer from using the product, even if it was built in the company’s lab. This highlights the high stakes of contract drafting in Indian employment law.

Trade Secrets and Confidentiality
An employee may be restricted from making use of their patented invention even though they own any patent for such an invention and they develop the invention as a result of using the employer's Trade Secrets or Confidential Information. Indian courts will protect confidential information without the existence of a written agreement based upon the principles of equity. As a result, an employee may have a unique situation where they own the patent of a product, but cannot manufacture the product without violating the confidentiality of the employer's proprietary information that was used in the development of the product.

Conclusion
Employee inventions in India are covered by the "Contractual Supremacy" principle. The Patents Act, 1970, does not provide any default protection for employer ownership of employee inventions, therefore, the organization has the obligation to outline the "duty to invent" in the employment agreement. The law protects employees in that they are the "true and first inventor" unless they have expressly waived those rights. As India evolves to become a more innovation-oriented country there is an urgent necessity for legislative modifications to the provisions in the Copyright Act, such as Section 17 that would allow for a more stable statutory framework for determining patent ownership of employee inventions.

© 2025. All rights reserved.